The financial statements suffer from the following limitations:
1. Financial statements include the quantitative information which is expressed in monetary units. They do not provide any qualitative information which may have greater impact upon the decision makers.
2. Financial statements record and reveal only the historical data in nature. They do not include any future possible results.
3. Financial statements are strictly confined within the boundary of some accounting principles. They are used as the guidelines in recording and reporting the financial transactions.
4. Financial statements are just the summary reports of the company's financial transactions. All the detailed information regarding to such transactions cannot be disclosed in the financial statements.
5. Financial statements show the information on cost basis i.e. the price paid on the transaction's date. The effect of price level changes (inflation) is not shown in the financial statements. In other words, the information are not given in the current value.
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